Federal Loans

Direct Loans and Federal Family Education Loans (FFEL) are the two largest government federal student loan programs. As of July 1, 2010, the FFEL program was eliminated. Most federal loans are now made through the Direct Loan program.

Federal Direct Loans are made directly by the federal government to students. Lenders and guaranty agencies are not involved in the process. FFELs are guaranteed loans made by private lenders. Although the FFEL program is federal, it is mostly administered through state or private nonprofit agencies called guaranty agencies. Guaranty agencies pay off the lenders when borrowers default, and in turn, are reinsured by the Department of Education. The U.S. Department of Education provides a list of state guaranty agencies.

The federal student loan programs are highly regulated by Congress and the U.S. Department of Education. The maximum interest rates, and many of the important terms of federal loans are set by Congress, and are similar in both the FFEL and Direct Loan programs. There are, however, a few important differences in available repayment plans for FFEL and Direct borrowers. For example, you must be in the Direct Loan program to qualify for public service forgiveness. The Department of Education posts sample promissory notes for most federal loans.

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Please understand that we do not provide legal advice about individual cases. We request that users first review the information on this site and call or e-mail only with general questions not answered here. This web site includes links to other resources for those who seek individualized legal advice or other help not offered here. This site is for people who already have student loans and want to know more about their options and rights.